The measure, aimed at reducing future public worker retiree benefit costs by some $80 billion over 30 years, was approved by lawmakers early Thursday morning after Gov. Andrew Cuomo, a first-term Democrat, struck deals with legislative leaders late Wednesday.

The legislation was tied to a clutch of bills that passed, including measures to expand Las Vegas-style casino gambling and the state's criminal DNA database.

"Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police," Cuomo said in a statement.

The approval was a defeat for labor unions, who claimed they were sold out by Cuomo. New York has the highest union membership rate among states, at just over 24 percent, according to the U.S. Bureau of Labor Statistics.

“This deal is about politicians standing with the 1 percent — the wealthiest New Yorkers — to give them a better break while telling nurses, bus drivers, teachers, secretaries, and laborers to put up and shut up,” Danny Donohue, the president of the state’s largest union of public workers, the Civil Service Employees Association, was quoted as saying by The New York Times.

Spiraling public-sector employee pension obligations are one of the top financial problems faced by state and local governments across the U.S.

The pension reform reduces retiree benefits for future state and local government workers, increases the amount higher-earning public employees contribute toward their retirement plans, and raises the retirement age by a year to 63, among other measures.

New York City Mayor Michael Bloomberg applauded the bill.

"Skyrocketing pension costs have caused fiscal crises in many cities and counties around New York, cutting into local governments' ability to deliver core services," Bloomberg said in a statement. "That's why mayors and county executives - from both parties, and from every region in the state - came together to support Governor Cuomo's plan."

A senior official in the Cuomo administration said that the deal will save local governments about $80 billion in pension costs over three decades. Cuomo had proposed a pension overhaul estimated to save $113 billion over three decades and relieve local governments of a growing cost in employer contributions that could threaten solvency. The deal worked out late Wednesday made changes to the plan, reducing the total but still producing a hefty savings.

In striking the deal, Cuomo scaled back the most contentious portion of his pension proposal, which would have given new public workers the option of forgoing a traditional pension and instead choosing a defined contribution plan, similar to a 401(k), according to the Times.

Reuters, The Associated Press and msnbc.com staff contributed to this report.